Help on AVERAGING

#1
As i am a beginner pls. help me on averaging a stock.
I buy 100 shares @ Rs. 200, now the share price go downwards and
it comes to Rs. 150, now pls tell me how much share I should
buy so that my average price comes to neat Rs.150 per share.
 
C

Czar

Guest
#2
Averaging a losing stock is lethal & shud be avoided at all cost unless you really know what you are doing....
 

columbus

Well-Known Member
#3
As i am a beginner pls. help me on averaging a stock.
I buy 100 shares @ Rs. 200, now the share price go downwards and
it comes to Rs. 150, now pls tell me how much share I should
buy so that my average price comes to neat Rs.150 per share.
Averaging a losing stock is lethal & shud be avoided at all cost unless you really know what you are doing....
Averaging within day for intraday traders is OK but lethal in case of others,
it is like catching a falling knife.
 
#4
Why one has to average? A wrong trade decision/wrong entry/the trade don't work as expected. Any way one has to average as the trade is not moving as expected, then why cling to that trade ?
 
#5
As i am a beginner pls. help me on averaging a stock.
I buy 100 shares @ Rs. 200, now the share price go downwards and
it comes to Rs. 150, now pls tell me how much share I should
buy so that my average price comes to neat Rs.150 per share.

from my personal experiance never average
try to exit on rally if anything visible on the charts

else exit the trade
 

pakatil

Well-Known Member
#6
As i am a beginner pls. help me on averaging a stock.
I buy 100 shares @ Rs. 200, now the share price go downwards and
it comes to Rs. 150, now pls tell me how much share I should
buy so that my average price comes to neat Rs.150 per share.
First Part of the query has already been answered.

Let me try the second part. If you buy 5,00,000 shares at Rs.150.00, your average will be Rs.150.01 (150.0099....). :D

Cheers
 

columbus

Well-Known Member
#7
First Part of the query has already been answered.

Let me try the second part. If you buy 5,00,000 shares at Rs.150.00, your average will be Rs.150.01 (150.0099....). :D

Cheers
The impact of average falls in the order 50% (first average),33% (second
average),25% (3rd average) and so on.So averaging once or twice in a day
for intraday traders is OK, but is not a nice practice in LT or ST.

In order to have 50% impact every time we have to buy the number
of stocks we hold.

Let me illustrate with this example:

Code:
     Shares     cost   Total cost  Average
        100        100      10000   
        100         80        8000        90
        200         60       12000       75      (90+60)/2....50% impact
        400         40       16000       57.5   (75+40)/2 ....50% impact

Total  800          cost: 46000    AVE:46000/800=  57.5
If you average 100 shares each at every averaging point ,the impact reduces to
50%....33%.....25%......20% .......so on.Hence it is not recomded after first TWO
or THREE averages.
 

pakatil

Well-Known Member
#8
The query as I understood, was he has 100 shares at Rs.200. Now the price has come to 150. Now how many he has to buy to get average of 150. Well, i think it is impossible. Even if 5,00,000 are bought....average comes to 150.01, not 150.!!!.

Ofcourse My perceptions & understandings can always be wrong. :D

Cheers
 

yasirdxb

Active Member
#9
As i am a beginner pls. help me on averaging a stock.
I buy 100 shares @ Rs. 200, now the share price go downwards and
it comes to Rs. 150, now pls tell me how much share I should
buy so that my average price comes to neat Rs.150 per share.
It is no practical to get a net Rs.150. so forget about it. first of all, averaging a losing trade just becoz the trade went wrong is an easy way to the poor house. it's only wise if it is a part of the strategy/system. so I would ask you about what you plan to do when the share goes to 100 or 50. how about 25?
give me a reply. I'll give you the best method.

by the way, averaging on a portfolio of shares is not a bad idea. but it is dangerous when you put your all eggs in one nest.

Yasir.
 

columbus

Well-Known Member
#10
It is no practical to get a net Rs.150. so forget about it. first of all, averaging a losing trade just becoz the trade went wrong is an easy way to the poor house. it's only wise if it is a part of the strategy/system. so I would ask you about what you plan to do when the share goes to 100 or 50. how about 25?
give me a reply. I'll give you the best method.

by the way, averaging on a portfolio of shares is not a bad idea. but it is dangerous when you put your all eggs in one nest.

Yasir.

PHP:
     Shares     cost   Total cost  Average    Cost-AVG
        100        100      10000         -             -
        100         80        8000        90             10
        200         60       12000       75             15
        400         40       16000       57.5          17.5


Total  800          cost: 46000    AVE:46000/800=  57.5
By opting AVERAGING the gap between ORIGINAL cost and AVERAGE
cost is increasing as seen from above example.

So it is not advisable to AVERAGE after couple of ADDs.
 

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